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Hungary

February 05, 2024

By Paul Hastings Professional

Back to International Employment Law

Hungary

KEY DEVELOPMENTS FOR 2024

Whistleblowing

The national legislature passed a new Whistleblowing Act (finally implementing the relevant EU Directive No. 2019/1937) which prohibits any onerous action (including employment's termination, demotion, refusal of promotion, giving a bad referral, salary decrease, etc.) regarding the whistleblowing employee's employment if the employee exercised the whistleblowing rights lawfully.

All employers with at least 50 employees must establish a whistleblowing system. Employers falling under the scope of the Anti-Money Laundering Act (financial institutions, real estate agencies, auditors, accountants, law firms, etc.) are obliged to establish a whistleblowing system regardless of the number of their employees. Employers not falling under the scope of the Anti-Money Laundering Act that have at least 50 employees, and a maximum 249 employees, had a grace period ending on 17 December 2023 to establish the whistleblowing system. Employers with more employees had to establish such a system as of 24 July 2023.

Third country workers

It is anticipated that there will be an influx of third country workers into Hungary. The legislature passed a new Third Country Workers Act, which allowed the entrance of third country (non-EEA) workers for a maximum of two years, whose term can also be extended for a maximum of one additional year. The details were to be set forth in a Government Decree. This Third Country Workers Act was to take effect on 1 November 2023, but in October 2023 the Government suspended it with a Government decree. This Act cannot be applied during the emergency situation resulting from the war in Ukraine. The Government has promised more strict rules on employment of third country workers. Employers must continue to keep a close watch on the upcoming legislation on this topic to ensure that the appropriate policies might be implemented.

Increased rights of new trade unions

The Constitutional Court declared as non-constitutional, and cancelled, a rule in the Labour Code, which provided that if a trade union becomes entitled to conclude a collective bargaining agreement (“CBA”) with the employer only after a CBA is already concluded with some other trade union, the new trade union can initiate the renegotiation of the CBA, but can participate in the negotiations only with limited (i.e., consultation) rights. The Constitutional Court cancelled said limitations of rights of the new trade union to be exercised during such negotiations. The employers have to accept the new trade unions that were organized at their place of work as having equal rights as the established trade unions.

With thanks to Zoltán Csernus, András Lovretity, and János Tamás Varga of VJT Partners for their invaluable collaboration on this update.

KEY DEVELOPMENTS FOR 2023

Lack of workforce

The trend of employees with qualifications sought for in Western EU countries to permanently leave Hungary caused a lack of workforce. To tackle this issue, the legislators introduced the category of qualified staffing agencies that are entitled to place foreign employees as temporary staffing to Hungarian companies. An existing staffing agency may apply for the licence to be licensed as a qualified staffing agency by the competent authority if the applicant complies with several conditions, among them at least 500 employees on average for the previous business year, a bank deposit dedicated to the payment of any potential tax fine, and a status of tax payer without tax debts certified by the tax authority.

There is a growing tendency to recruit Chinese, Mongolian and Vietnamese employees for the needs of new manufacturing factories opened by investors from the Far East.

The employers should take into account the tendency of migration of Hungarian employees to Western Europe when deciding on new investments, particularly in Eastern Hungary.

Introduction of longer paternal leave

The legislation implemented the Directive 2019/1158 on paternity leave. Fathers have the right to take 10 working days (instead of five working days) of paternity leave within two months as from the time of birth of the child. The first half of the paternal leave is fully compensated, while for the second half the employer pays 40% of the salary. In addition, a new type of parental leave is also introduced, namely the employee has the right to have 44 working days of parental leave until the third year of age of the child if the employment is continued for at least one year since the birth of the child. This type of parental leave is compensated only with 10% of the salary.

Employers should take into account the probability of these longer and new types of leave for fathers. Mothers giving birth usually use their maternal unpaid leave for a maximum of three years.

New rules of annual leave

Employers will be entitled as from the new year to refuse the employee’s request to use seven working days of annual leave (out of statutory 20 working days) at a time set by the employee, if some exceptionally important economic interests of the employer or a reason affecting directly and gravely its operation arises. Such right of refusal applies also to the right to the parental leave of 44 working days.

The employers should pay attention in the future to the balance between their economic interests and the interests of their employees for annual leave at the desired period.

With thanks to Zoltán Csernus, András Lovretity and János Tamás Varga of VJT Partners for their invaluable collaboration on this update.

KEY DEVELOPMENTS FOR 2022

More flexible regulation regarding homeworking arrangements

The Hungarian Civil Code had an inflexible approach to the regulation of remote working. According to the statutory rules, employees had to be employed 100% of the working time at a place away from the employer’s office.

Due to COVID-19, Hungarian legislation relaxed the rules and a new statutory definition of home office was introduced. Under this legislation, remote workers could work up to 33% of their time at the employer's office, although the parties can deviate from this rule by written agreement. Homeworking arrangements are expected to become increasingly popular and further legislation relating to the same is anticipated.

Mandatory vaccinations for health service providers

The COVID-19 pandemic and the need to maintain the operation of the health service sector forced the Government to introduce obligatory vaccinations in this sector of the economy. The Government ordered in a decree that health service providers can only employ persons who are vaccinated against COVID-19, while persons already employed were obliged to get their first, second and third vaccine in 2021. Those who fail to get the vaccine can be ordered by their employer to do so within 15 days. If the employee fails to comply, then the employer is obliged to terminate employment with immediate effect with no severance being payable.

Employers should continue to monitor developments in this area of law.

Employers in the business sector able to require employees to be fully vaccinated

The COVID-19 pandemic and the need to maintain the operation of the economy forced the Government to introduce the possibility of obligatory vaccination in the business sector. The Government passed a decree which entitles employers to require their employees to be fully vaccinated against COVID-19 from 1 November 2021. Employers must set a deadline of at least 45 days for the first vaccine shot. If the employee fails to comply, the employer is entitled to unilaterally place the employee on unpaid leave, unless an exemption applies (i.e. if the employee has a medical certificate that vaccination could be harmful to him / her). If after one year of unpaid leave the employee is still unvaccinated, the employer is entitled to terminate the employee’s employment with immediate effect.

Employers should ensure that they take into account the nature of the working place and the employees’ roles before implementing a mandatory vaccination policy.

KEY DEVELOPMENTS FOR 2021

Amendment of the Labour Code to further facilitate child adoption

If the employee intends to adopt a child, he/she is entitled to be released from working obligations for a maximum of 10 working days to be able to meet the child. The employee can exercise such right on five days' notice and if supported by a certificate issued by the adoption organization. The employee is entitled to an absentee fee for this period (which is calculated as an average of basic salary for the previous six months plus any overtime payment). The parties cannot deviate from such right in contract as this rule applies to contracts of all employees.

Amendment of the Labour Code on the posting of workers

The Labour Code is amended in line with the Directive (EU) 2018/957 concerning the posting of workers in the framework of the provision of services. Hungarian law shall apply to the rules of salary, accommodation and cost reimbursement of posted workers. Collective bargaining agreements for the given sector shall apply. If the posting period is longer than 12 months, the Hungarian Labour Code shall apply to the employment with the exception of rules of establishment and termination of employment and the non-competition agreement. The employer can apply to the authority to extend the said 12 months by a further six months. If the employer substitutes the employee with another employee doing the same tasks, the period of posting of both employees will be calculated jointly. If the foreign temporary staffing agency lends employees, its client has to inform the agency on the working conditions and salaries.

Increase of the statutory minimum wage

The Government and the trade unions agreed on the increase of the statutory minimum wage by 4%. Therefore, from 1 February 2021 the statutory minimum wage for unskilled employees is HUF 167,400 (approximately EUR 468), and for employees in job positions requiring at least secondary school is HUF 219,000 (approximately EUR 613).

KEY DEVELOPMENTS FOR 2020

Amendments to the Labour Code effective as of 1 January 2020

A number of changes come into effect from 1 January 2020 as a result of amendments to the Hungarian Labour Code. Some of these changes can be summarised as follows:

A person under the age of 16 may be employed in cultural, artistic, sporting or advertising activities without permission of the child protection authority. A prior notification of 15 days is required before the proposed start date.
Employees with small children have more opportunities to demand part-time work from their employer. At the employee's request, the employer must modify the employment contract into a part-time contract for four hours per day (instead of eight hours per day) if the employee's child is younger than the age of four (or until the child reaches the age of six, if the employee has three or more children). The previous age limits were three and five years, respectively. In the case of adoption, employees may take unpaid leave for 3 years. If the adopted child is older than the age of three, then the adopting employee will be entitled to six months of unpaid leave. Employees who are grandparents may take unpaid leave until a child who is under their care reaches the age of two.

Increase of the statutory minimum wage

The Government's new decree increased the statutory minimum wage by 8%. As of 1 January 2020, the statutory minimum wage for unskilled employees is HUF 161,000 (approximately EUR 474), or HUF 210,000 (approximately EUR 621) for employees in a job requiring at least secondary school education.

Amendments to the Labour Protection Code

From 1 January 2020, as a result of changes to the Labour Protection Code, employers are obliged to report any employees' occupational exposure to carcinogenic or mutagenic substances. If an employer is found to be in breach of this obligation, the employer may receive a fine from the relevant authority.

KEY DEVELOPMENTS FOR 2019

Changes in the Hungarian fringe benefits system

The range of fringe benefits with low tax rates have been radically reduced from 1 January 2019. Employers are now required to pay higher taxes for most fringe benefits. As a result of such changes, employers will most likely offer limited fringe benefits to employees. The following changes apply:

the 100,000 HUF allowance payable by the employer in cash is excluded from the fringe benefits;
the lower tax category (which will be 34.5% in 2019) only includes the SZÉP Card (bank card with amounts to be spent for recreational and sport purposes) with an annual HUF 450,000 frame;
the higher tax category (which will be 40.71% in 2019) only includes the SZÉP Card above the annual HUF 450,000 frame and a gift voucher once a year, up to 10% of the minimum wage; and
all other fringe benefits (e.g. seasonal ticket for commuting employees, voluntary social security payments by the employer, hot meal vouchers at the work place etc.) are taxed at the higher tax rate, as well as wages, in accordance with the general rules.

Amendments to the Labour Code on working hours

The amendment to the Labour Code came into force on 1 January 2019 and provides that the working hours’ timeframe (a timeframe within which the daily working hours can be allocated unequally) can be increased from one year to three years by a collective bargaining agreement concluded with a trade union.

In addition, important changes have been made to the number of overtime working hours that can be imposed on the employee. The Labour Code previously provided that employers could request their employees work 250 hours of overtime each year. Where there is a collective bargaining agreement this can be increased to 300 hours. As of 1 January 2019, in addition to the current overtime working hours, the employer and employee can separately agree to a further 150 (or respectively 100) hours of overtime work (up to a total of 400 overtime working hours annually) known as the so called ’voluntarily undertaken overtime’. This voluntary agreement can be terminated by the employee only at the end of the calendar year.

Increase to the statutory minimum wage

As of 1 January 2019, the statutory minimum wage has increased to HUF 149.000 (approximately EUR 465) for unskilled workers and HUF 195.500 (approximately EUR 610) for employees who have attended secondary school.

KEY DEVELOPMENTS FOR 2018

New Definition of Disadvantaged Employee in Labour Code

From 1 January 2018, the Hungarian Labour Code regulates the definition of the disadvantaged employee.

Reduced Limitation Period for Challenging Delivery of Documents

From 1 January 2018, if a document (e.g. termination notice) was sent to a party (e.g. employee) and receipt is based on statutory presumption, such party may challenge the presumption of lawful delivery within 3 months (instead of 6) from the date of the presumption.

New Supreme Court Decision: Severance Pay

According to the Labour Code employees are not entitled to a severance payment if the cause of termination relates to his/her behaviour or non-health related ability. This was challenged in the Supreme Court which deviated from this rule and prescribed severance payment for every case of employment termination. However, in a new Supreme Court decision the Court held that when the employment is terminated due to the gross misconduct of the employee, the employer is not obliged to pay severance.

KEY DEVELOPMENTS FOR 2017

Regulation of working time weekly breaks for employees in the retail sector

The government intends to introduce two mandatory free weekends per month for employees in the retail sector.

Additional public holidays

The government intends to make Good Friday and 24th December new public holidays.

KEY DEVELOPMENTS FOR 2016

Sunday working ban for the retail sector has been lifted

In April 2016, the ban on the operation of the retail sector on Sundays which had been in effect from March 2015 was lifted. The ban was unpopular with consumers and it caused substantial job losses in the retail sector.

New rules to allow the withdrawal of termination notices if the employee is pregnant

The amendment of the Labour Code means that an employer can now withdraw the termination of employment within 15 days of the employee informing the employer of her pregnancy.

Change in laws applicable to employment agreements with school cooperatives

The rules on employment agreements between school cooperatives and its member (a student) became more flexible, as their agreements will now be governed partly by the Civil Code and partly by the Labour Code as from September 2016.

With thanks to Zoltán Csernus, János Tamás Varga, András Lovretity and Krisztina Lakner of VJT & Partners for their invaluable collaboration on this update.